FM Nirmala Sitharaman holds a pre-budget meeting with stakeholders

Stakeholders from the financial sector and the capital market on Tuesday met Finance Minister Nirmala Sitharaman to discuss their demands ranging from taxation reforms to restoration of trading of banned agricultural commodities.

On the second day of the series of meetings before the Budget 2023-24, some equity market stakeholders demanded that category-III of Alternative Investment Funds (AIFs) be given the pass-through status in terms of taxation to protect them from potential double taxation, said people privy to the meeting.

Category I and II AIFs are investors in private markets as they buy shares and bonds of unlisted companies. Category III usually comprises ‘hedge funds’ who invest their money only in listed securities.

Representatives from the commodity market have demanded cost rationalisation and reduction of commodity transaction tax to Rs 500 per crore from Rs 1000 per crore, said an official.

Furthermore, some industry stakeholders asked to bring GIFT city reforms at par with Singapore and Hong Kong.

Reps from the brokering segment have requested to grant industry status for financial intermediaries under the Securities and Exchange Board of India (Sebi) so as to attract more investment and to enable large spending on technology at lower financial costs.

“In the meeting, we demanded restoration of rebate under Section 88E to provide relief from high transaction costs. This will lead to higher volume, depth and liquidity in capital markets,” said another source.

Earlier, some of the foreign funds had made representations to the ministry seeking a uniform tax rate to ease the compliance burden. Currently it depends on the asset class and the holding period.

Industry bodies have also sought tweaking of buyback tax as companies pay flat 20 per cent plus surcharge on buybacks. The demand is to make it taxable in the hands of investors. A similar proposal was also mooted in a recent discussion paper by Sebi.